Question

Given the following data for Keyboard Division:

Selling price to outside customers $ 40
Variable cost per unit 29
Fixed cost- Total 66,000
Capacity (in units) 135,000
The Computer Division would like to purchase 18,000 units each period from the Keyboard Division. The Keyboard Division has ample excess capacity to handle all of the Computer Division's needs. The Computer Division now purchases from an outside supplier at a price of $41. If the Keyboard Division refuses to accept an $39 price internally, the company, as a whole, will be worse off by:______
a. $34,000.
b. $102,000.
c. $136,000.
d. $51,000.

Answer 1

Answer: $136,000

Step-by-step explanation:

Data Given

Selling price to outside customer = $40

Variable cost per unit = $29

Fixed cost (Total) = $66,000

Capacity (in units) = 135,000

Purchased unit = 17,000

Outside suppliers price = $37

Worse off price = purchased unit ( outside supplier price - variables cost/unit).

= 17,000 ( $37 -$29)

= 17,000 ( $8 )

= $136,000

Therefore; the company would be worse off by $136,000.